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Displaying blog entries 1-9 of 9

Loan Demand Holds Steady, For Now

by Melissa Dierks

Mortgage applications mostly held steady in the latest week as interest rates dropped slightly. But CNBC reports that we could simply be in “the calm before the storm.” The Federal Reserve is largely expected to start raising rates in September, which likely will impact loan demand.

For the week ending Aug. 21, total mortgage applications – including for refinancings and home purchases – rose 0.2 percent week-to-week on a seasonally adjusted basis, the Mortgage Bankers Association reported on Wednesday.

Check our report and infographic of last week's numbers.
Broken out, refinance applications dropped 1 percent while applications for home purchases ticked up 2 percent. Applications for home purchases are 18 percent above the same week a year ago, according to MBA. Meanwhile, MBA reports the average interest rate for a 30-year fixed-rate mortgage fell to 4.08 percent, falling from 4.11 percent the week prior.

The stock market’s plunge on Monday sent mortgage rates lower, and lenders were reporting stronger interest from consumers on Monday.

"The turmoil in global stock markets and subsequent drop in interest rates that began late last week is not evident in these results, but will likely have a significant impact on next week's results," says Mike Fratantoni, MBA’s chief economist.

But as rates move higher — which they are largely expected to soon do — home buying also will likely see some initial momentum from the increases.

“Rate moves, especially higher, can cause a short-term surge in home buying” as buyers rush to lock in low rates before any additional increases, CNBC reports. “When rates sit at low levels for a long time, buyers are less apt to act.”

Susan Maklari, senior equity analyst at UBS, told CNBC that they continually hear from homebuilders that there is a lack of urgency among buyers “in part because rates haven't moved at all.”

Source: “Mortgage Applications Up 0.2%, Steady Before Market Storm,” CNBC (Aug. 26, 2015)

A 10-Year Housing Surge on the Horizon?

by Melissa Dierks

The housing market is poised for one of its largest expansions in history. By 2024, demographic and economic changes are forecasted to bring 15.9 million additional households on board, according to a new study released by the Mortgage Bankers Association.

That means an average of 1.6 million additional households per year, sparking “housing market growth over the next decade that would be among the strongest the U.S. has ever seen,” according to the report.

The MBA report says the bulk of that growth will be from increases in the number of households who are headed by those age 60 and older and households headed by age 45 and younger. Those age group increases are expected to mitigate the decline among households age 45 to 60.

Why you shouldn't be alarmed by dips in home ownership rates
“An aging population should gradually increase demand for home ownership, partially offsetting the influence of a more racially and ethnically diverse population on home ownership rates,” the MBA report notes.

The Census Bureau projects the following breakdown in ages emerging in 2024, as compared to 2014:

20 million more people age 60 and over than there are today (as Baby Boomers age),
4 million fewer people age 45 to 59 (as the large Baby Boomer cohorts are replaced by smaller Generation X cohorts) and
18 million more people age 18 to 44 (as smaller Generation X cohorts are replaced by larger Millennial cohorts)
Household growth is also expected to be driven by 5.5 million additional Hispanic households. For other races, 3.4 million additional non-Hispanic White households are expected to form by 2024, 2.4 million additional black households, 1.8 million more Asian households, and 730,000 additional other households.

Source: “Housing Demand,” Mortgage Bankers Association (2015)

New-Home Starts Surge to 2007 Highs

by Melissa Dierks

Homebuilders broke ground on new homes at the fastest pace in about eight years, according to statistics released by the Commerce Department Tuesday.

“A fresh supply of new homes will therefore reach the market in upcoming months to help relieve the inventory tightness,” says Lawrence Yun, the chief economist for the National Association of REALTORS®. “There is no need to worry about an oversupply. Even more production would be welcomed.”

NAR's perspective on the latest housing starts
An increase in single-family housing starts led the strong rebound in housing production in July, climbing 12.8 percent month over month to a seasonally adjusted annual rate of 782,000 units. The volatile multifamily market, on the other hand, dropped 17 percent last month to 424,000 units.

"Our builders are reporting more confidence in the market, and are stepping up production of single-family homes as a result," says NAHB Chairman Tom Woods. "However, builders are still reporting problems accessing land and labor."

"This month's drop in the more volatile multifamily side is a return to trend after an unusually high June," says NAHB Chief Economist David Crowe. "While multifamily production has fully recovered from the downturn, single-family starts are improving at a slow and sometimes intermittent rate as consumer confidence gradually rebounds. Continued job and economic growth will keep single-family housing moving forward."  

Homebuilder confidence: Builders Feel Like It's the Housing Boom Days
Regionally, new-home starts – reflecting both single-family and multifamily starts -- jumped by the highest percentages in the Midwest, which saw a 20.1 percent increase in starts in July. The South also posted a 7.7 percent gain in starts. On the other hand, the Northeast posted a 27.5 percent decrease in housing starts in July, followed by a 3.1 percent loss in the West.

Housing permits – a sign of future production – posted a 16.3 percent decrease in July. Single-family permits dropped 1.9 percent to a rate of 679,000 while multifamily permits fell 31.8 percent to 440,000.

Source: National Association of Home Builders

Borrowers Make Fewer Late Payments

by Melissa Dierks

The mortgage delinquency rate – borrowers who are late on their mortgage payments by 60 days or more – is rapidly declining, dropping to 2.72 percent in the second quarter, according to a new report by TransUnion. The delinquency rate has fallen 20 percent in the last year alone, and by about half in the last three years, when it stood at 5.39 percent in the second quarter of 2012.

 Read more: Loan Delinquencies Back to Pre-Crisis Levels
Forty-eight states and all of the top 10 largest metro areas saw double-digit declines in seriously delinquent mortgages. The largest declines were in Miami (down 40 percent from 8.87 percent in the second quarter of 2014 to 5.31 percent in the second quarter of 2015) and Los Angeles (down 29.1 percent from 2.62 percent in 2014 to 2.07 percent in 2015).

"This is the lowest mortgage delinquency level we've seen in several years – down from a peak of nearly 7 percent in early 2010," says Joe Mellman, vice president and head of TransUnion’s mortgage group. "This is largely due to foreclosures and other seriously delinquent accounts continuing to work their way through the foreclosure process, as well as a reflection of the high credit quality of recent originations."

TransUnion reported mortgage originations to subprime and near prime consumers had a year-over-year double-digit growth of 13.3 percent and 22.4 percent – a possible signal to a slight loosening of credit.

"We believe a major reason for the increase in mortgage originations was due to falling mortgage interest rates," Mellman says. "The growth in jumbo loans for the Prime Plus and Super Prime risk tiers was another key driver. Despite this increase, it should be noted that there were 1.1 million fewer mortgage originations this past quarter compared to the pre-recession high in the third quarter of 2007."

The average mortgage balance per consumer rose to $188,237 in the second quarter of 2015. For comparison, mortgage balances were at $186,999 at this point last year.

Source: TransUnion

Home Prices Rise in Nearly Every U.S. Metro

by Melissa Dierks

The nationwide inventory crunch has pushed up home prices year-over-year in 93 percent of the country's 176 major metro areas during the second quarter, according to the National Association of REALTORS®. Nineteen percent of those metros, or 34, saw double-digit increases in the second quarter.

5 Priciest Housing Markets
San Jose, Calif.: $980,000 (median single-family price)
San Francisco: $841,600
Anaheim-Santa Ana, Calif.: $685,700
Honolulu: $698,600
San Diego: $547,800
5 Most Affordable
Cumberland, Md.: $82,400 (median single-family price)
Youngstown-Warren-Boardman, Ohio: $85,000
Rockford, Ill.: $94,700
Decatur, Ill.: $96,000
Elmira, N.Y.: $98,300
Source: National Association of REALTORS®
"Steady rent increases, the slow rise in mortgage rates, and stronger local job markets fueled demand throughout most of the country this spring," says NAR Chief Economist Lawrence Yun. "While this led to a boost in sales paces not seen since before the downturn, overall supply failed to keep up and pushed prices higher in a majority of metro areas."

For renters considering home ownership, affordability is becoming a growing problem, Yun says.

"With home prices and rents continuing to rise and wages showing only modest growth, declining affordability remains a hurdle for renters considering home ownership — especially in higher-priced markets," Yun says.

The national median price for an existing single-family home in the second quarter was $229,400 — an 8.2 percent increase from a year ago.

"The ongoing rise in home values in recent years has greatly benefited home owners by increasing their household wealth," says Yun. "In the meantime, inequality is growing in America because the downward trend in the home ownership rate means these equity gains are going to fewer households."

The median household income in the U.S. rose slightly to $66,637 in the second quarter, but it would still take annual earnings of $49,195 to buy a home at the national median price with a 5 percent down payment; $46,605 for a 10 percent down payment; and $41,427 for a 20 percent down payment, according to NAR.

Regional Snapshot on Home Sales
Here's a look at how home sales fared across the country in the second quarter:

Northeast: Total existing-home sales rose 10.3 percent and are 8.6 percent ahead of this time last year. Median single-family price: $269,300, up 5.2 percent from a year ago.
Midwest: Existing-home sales climbed 13.4 percent and are 12.7 percent higher than a year ago. Median single-family price: $182,000, a year-over-year increase of 8.7 percent.
South: Existing-home sales dropped 1.1 percent but are 6.3 percent above the second quarter of 2014. Median single-family home price: $202,900, up 8.7 percent compared to a year ago.
West: Existing-home sales climbed 8.1 percent and are 8.1 percent above a year ago. Median single-family home price: $325,200, up 9.6 percent over year-ago levels.
Source: National Association of REALTORS®

More Prepared House Hunters Emerging?

by Melissa Dierks

Prospective buyers want to enter their home search totally prepared, according to a new survey of more than 2,500 Americans. These buyers plan on getting pre-approved prior to the home buying process and intend to make sizable down payments.

Read more3 in 10 Americans Looking to Buy

Overall, slightly more than half of those surveyed – 52 percent – say they are likely to purchase a home in the next five years, according to the 2015 BMO Harris Bank Homebuyers Report. What's more, the majority say they're willing to pay an average of $296,000 on their next home purchase and intend to make an average 21 percent down payment.

Of the likely buyers, 78 percent say they plan to get pre-approved for a mortgage before seriously searching for a home. Three quarters of home owners said they set a budget before looking for a home. Sixteen percent said they stuck to that budget and ended up spending less while 13 percent of those who recently purchased said they ended up spending more than their budget.

"Getting pre-approved helps buyers understand their budget as they start their home search," says Alex Dousmanis-Curtis, group head of the U.S. Retail and Business Banking at BMO Harris Bank.

About 63 percent of the home owners surveyed spent less than six months searching for a new home before making a purchase. Eight percent of those surveyed said they bought a home without even participating in an active real estate search or planning to buy but ended up buying because a specific property caught their attention.

Source: BMO Harris Bank

Appraisers, Owners Out of Sync on Values

by Melissa Dierks

Home owners may be increasingly overvaluing their homes. Appraiser opinions of home values were 2.33 percent lower than home owners' estimates in July, according to Quicken Loans' national Home Price Perception Index. The gap between home owner estimates and appraiser opinions were nearly double the gap between the values in May.

Read more: Board Strengthens Appraiser Qualifications

"Many home owners around the country are seeing the national headlines about home value increases and they are optimistic about their equity increasing," says Bob Walters, Quicken Loans chief economist. "While some areas are seeing the same level of home appreciation, or even more, there are also some areas that have slower home value increases. This can lead to home owners and appraisers not quite seeing eye-to-eye."

Home values in a handful of markets mostly stayed flat last month on a month-to-month basis, according to Quicken Loans' HPPI.

"A slowing of home value increases adds to the misunderstanding of local home values," Walters says. "Appraisers are viewing the housing industry every day; they know when home values growth may be slowing. Home owners may think values are still skyrocketing, when they have instead returned to more healthy appreciation in their area."

Source: Quicken Loans

How High Will Mortgage Rates Actually Climb?

by Melissa Dierks

The lowest mortgage rates on record have lured buyers during the last few years, but the Federal Reserve has already given plenty of signals that will soon come to an end.

Read moreRising Mortgage Rates May Spark Buying Frenzy

Mortgage rates are already inching up, ever-so-slightly. From January to June, the 30-year fixed-rate mortgage climbed from 3.7 percent to 4.2 percent. Mortgage rates recently have been hovering around 4 percent.

In this latest era of super-low mortgage rates, what's normal? A 6 percent interest rate is "normal," says Jonathan Smoke,®'s chief economist. He says mortgage rates likely won't hit that point in the next two years, however.

"We will likely see less than a 100 basis point increase over the next two years, which would bring us to around 5.5 percent in 2017," he says.

If Smoke's prediction holds true, mortgage rates will then remain below normal even in two years. However, that increase in rates would translate into a 12 percent increase in monthly payments over current rates, according to Smoke.

For now, mortgage rates remain low, and in 80 percent of the U.S. markets, it's more affordable to buy a home than rent, according to®.

Source: "Just How High Might Mortgage Rates Go?"® (Aug. 14, 2015)

Credit Unions Gaining Ground with Buyers

by Melissa Dierks

Mortgage shoppers are increasingly turning to credit unions to get a mortgage, according to new research by TransUnion.

Credit unions' share of all mortgage originations has grown considerably over the last two years, from 7 percent in the first quarter of 2013 to 11 percent in the first quarter of 2015, according to TransUnion.

Read moreCredit Unions and Real Estate: A Perfect Pairing?

"Mortgage originations had declined substantially across the board in the last few years; however, the decline had been less dramatic for credit unions," says Nidhi Verma, director of research and consulting in TransUnion's financial services business unit. "In the last year alone, it appears significantly more credit union executives are seeing growth in this area. Credit unions are becoming bigger players in the mortgage loan market, something that may serve them well in the future as the housing market continues to recover."

Credit unions saw 25 percent growth in non-prime mortgage originations in the first quarter of 2015 while the rest of the industry increased at 4 percent.

"As the U.S. economy continues to recover, non-prime mortgage originations are growing for both credit unions and the rest of the industry," said Verma. "Historically, credit unions have seen lower delinquency rates than the rest of the industry, and their focus on membership expansion makes them well-positioned to take advantage of this growth."

Source: "TransUnion: Credit Unions Go Big in Mortgage Originations," HousingWire (Aug. 11, 2015)

Displaying blog entries 1-9 of 9




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Melissa Dierks
Keller Williams Professional Partners
7025 W Bell Road, Suite 10
Glendale AZ 85308
Direct: (623)229-0154
Office: (623)643-1092
Fax: (623)201-7562

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